Kuwait - Gulf Insurance Group (GIG) leads the top M&A transactions led by Kuwaiti buyers during 2021 as per a report recently issued by the Investment Banking Department at Kuwait Financial Centre (Markaz).
The report highlights the multi-million-dollar transaction whereby GIG acquired 100% of AXA S.A.’s operations throughout the GCC for a total consideration of $474.8 million. As a part of this transaction, GIG will acquire 100% of AXA Gulf, a 50% stake in AXA Cooperative Insurance Company and a 28% stake in AXA Green Crescent Insurance Company, from AXA S.A. and Yusuf Bin Ahmed Kanoo Group .
Al Futtouh Holding Company led the second largest closed by a Kuwaiti buyer as it acquired a 45% stake in Al Ansar United Real Estate Company for a total consideration of $161.4 million. It is worth noting that the target is a subsidiary of Kuwait Projects Holding Company (the seller), who intends to divest an additional 10% stake in the company however it has yet to finalize the transaction.
Moreover, Al Janah Holding Company acquired a 10% stake in Qurain Petrochemical Industries Company from Petrochemical Industries Company (PIC) for $154.0 million. PIC divested all 110.0 million of its shares in the company through an auction that closed at $1.4 per share.
The report also highlights the largest transactions taken on by Kuwaiti buyers throughout 2019 and 2020, starting with Boursa Kuwait Securities Company (Boursa Kuwait), who took on the largest transaction for 2020. Boursa Kuwait successfully acquired a 13% stake in Kuwait Clearing Company for a total consideration of $39.2 million.
Alghanim Trading Company reigned the top transactions for 2019 by a landslide when it sealed a deal for a 16% stake in Gulf Bank for a total consideration of $501.0 million, at ~ $1.0 per share. Note, Alghanim Trading Company acquired the shares from Kuwait Investment Authority, and in doing so, raised its total stake in Gulf Bank to 33%.
M&A Growth (by Kuwaiti buyers)
According to Markaz’s report, Kuwaiti acquirers sealed a total of 33 transactions throughout 2021, which demonstrates a 38% growth year over year and a 13% decline in activity between 2019 and 2021. Kuwaiti acquirers primarily acquired local companies and acquired companies based in other parts of the GCC as well as countries cross-border, to a lesser extent.
This is evident as 78% of the transactions that Kuwaiti buyers closed throughout 2019-2021 involved Kuwaiti companies, followed by GCC and cross-border targets, at 15% and 7%, respectively.
GCC M&A deals (Kuwaiti buyers)
Throughout 2019-2021, Kuwaiti acquirers sealed a total of 81 transactions involving GCC targets, demonstrating a 40% growth year over year between 2020 and 2021 and a 15% decline between 2019 and 2021. Investor confidence slowly grew as the uncertainty onset by the COVID-19 pandemic eased, as the total number of cases decreased, and as restrictions were uplifted. Although the market has not returned to historical M&A levels, it is evident a recovery is paving its way.
Moreover, Kuwaiti acquirers primarily acquired local companies which is evident as 91% of the transactions closed involved Kuwaiti targets, whereas the remaining 9% involved companies in other GCC countries. With the exception of Qatar, Kuwaiti buyers closed at least one transaction involving companies based in the GCC.
Overall, Kuwaiti acquirers primarily targeted companies within the Financials, Real Estate and Industrials sectors. Collectively, these transactions accounted for 66% of the total transactions closed by Kuwaiti buyers within the GCC. The sectors that attracted the least level of activity were the Insurance, Energy and Materials sectors, each of whom accounted for less than 2% of the total activity (closed) throughout 2019-2021.
Cross-Border M&A deals (Kuwait buyers)
Between 2019-2021, Kuwaiti acquirers sealed a total of 14 cross-border transactions. Kuwaiti acquirers demonstrated a specific interest in Egypt and the United Kingdom, in which they closed a total of 4 and 3 transactions, respectively. Aside from Egypt and the United Kingdom, Kuwaiti acquirers closed a total of one transaction each within various countries including but not limited to Belgium, India, Kenya, Spain among others.
Petrochemical Industries Company reigned the largest transaction taken on by Kuwaiti acquirers throughout the past three years at $476.2 million, with its acquisition of a 49% stake in SKC Company Limited, a South Korean manufacturer and marketer of chemicals and films products. This was followed by Wafra who acquired a minority stake in Digital Colony Management, the digital investment management division of global investment firm Colony Capital, for $400.0 million.
Moreover, Boubyan Bank successfully acquired a ~43% stake, or 73.0 million shares, of Bank of London and the Middle East Holdings (BLME) for a total consideration of $158.0 million. As such, Boubyan Bank raised its stake in BLME to +71%.
Kuwaiti acquirers primarily targeted companies within the financials and real estate sectors. Collectively, these transactions accounted for 51% of the total transactions closed by Kuwaiti buyers that involved foreign companies. The sectors that attracted the least level of activity were the Industrials, Information Technology and Logistics sectors, which each accounted for 7% of the total activity (closed) throughout 2019-2021.
M&A deals (Kuwaiti targets)
Furthermore, there was a total of 104 closed transactions involving Kuwaiti targets. Kuwaiti and other buyers accounted for a majority of these transactions at 59% and 26%, followed by foreign and GCC buyers who made up 10% and 5%, respectively. 2021 witnessed the highest number of closed transactions at 39, while 23 and 37 transactions were recorded during 2020 and 2019, respectively.
Between 2020 and 2021, Kuwaiti acquirers saw a year over year growth of 21% in comparison to a 28% decline in activity between 2019 and 2021. It is evident Covid significantly impacted the level of M&A activity, demonstrated by the significant drop in the year 2020.
It is worth noting that 34% of the transactions that closed between 2019-2021 involved transactions in the financials sector. The real estate, industrials, and consumer discretionary sectors accounted for 15%, 12%, and 9% of all closed transactions involving Kuwaiti targets, respectively, whereas the insurance, materials, logistics, and construction sectors accounted for the least number of closed transactions, at 1% each.
Deals in the pipeline
By the end of 2021, there was a total of 13 announced transactions in the pipeline. The majority of these transactions involved Kuwaiti targets, at 85%, whereas the remaining transactions equally involved Bahraini and UAE targets. The largest of these transactions was taken on by Kuwait Telecom Company who penned a binding agreement to acquire 100% of E-Portal Holding Company and its local subsidiaries for a total consideration of $75.7 million. Closing is subject to obtaining necessary regulatory approvals.
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